The decision by the U.K. Financial Conduct Authority to withdraw its list of 95 countries considered to be at “high risk” of financial crime points to the need for more open assessment of overseas jurisdictions by the British regulator, according to the chief executive officer of the main trade body for the Cayman financial services industry.

“Of course, it’s good news,” Gonzalo Jalles, CEO of Cayman Finance, said of the FCA’s decision. “I don’t think the [FCA’s] methodology was properly thought through.”
Jalles said he would like to see details of the FCA’s approach and get an idea of how the U.K. regulator plans to offer risk assessments of other jurisdictions.

Jalles, who estimates the financial services industry accounts for about half of Cayman’s gross domestic product, said he suspected the FCA sees this high proportion as a risk factor. Size, he argued, actually limits per-transaction risk by generating the revenue needed to support effective regulation. But “unless we see the [FCA’s] methodology,” he said, “I can’t really say that’s the problem” with the regulator’s thinking.

The Cayman government welcomed the FCA’s decision to remove its “high risk” list from its website. The U.K. regulator, the Cayman government said in a statement, “has committed to a full review of the methodology that resulted in the Cayman Islands being placed on the list.”

The Cayman government said it had been in contact with the FCA since it raised the issue in a letter to the FCA on July 8.

In a brief statement, the FCA confirmed the removal of the list. “The information published related to a specific freedom of information request,” the FCA said. “There are no plans to replace the information on our website.”

The FCA, which declined to comment on its statement, said companies seeking information “on country risk can access a broad range of publicly available information and indices.”

Among these, the regulator said, are the U.K. Treasury’s sanctions list and material published by the U.K. government on overseas business risk.

The FCA’s list attracted wide attention in August 2014 when the Cayman Islands government complained about its inclusion on it. The Cayman government had obtained the list as a result of a freedom of information request. The U.K. regulator had intended the list for internal use.

Wayne Panton, the Cayman minister of financial services, said in August the government was “considering all options,” including court action, in its effort to get off the list. “We take this matter seriously,” Panton said in a statement.

Criticism of the FCA also came from the Cayman Islands Chamber of Commerce, which described the listing as a “deliberate and misguided attempt to smear Cayman’s reputation and credibility as one of the world’s best regulated jurisdictions.”

Jalles said any further action would now be up to the Cayman government. “At this state,” he said, “I think it’s one-to-one discussions.”

Further options, Jalles added, could be a freedom of information request for the FCA’s methodology, and a possible move toward a judicial review. But “I wouldn’t go that far,” he said of legal action.

Jalles said it would be “very difficult” to say if the issue had damaged the Cayman Islands. He said he does not think it caused any firm to leave the jurisdiction. But the attention, he suggested, could have caused prospective entrants to look elsewhere.

“How much business we’ve lost during this two months because of this is impossible to say,” Jalles said.